Sept. 26 (Bloomberg) -- Purchases of new houses in the U.S. probably declined in August to the lowest level in six months as buyers sought cheaper distressed properties, economists said before a report today.
Sales fell 1.3 percent, a fourth consecutive drop, to a 294,000 annual pace, according to the median estimate in a Bloomberg News survey of 59 economists.
Foreclosure-driven price decreases for previously owned homes may keep luring investors away from new properties, hurting builders like Lennar Corp. Limited access to credit, rising unemployment and waning consumer confidence also signal the industry that helped precipitate the last recession will take time to find its footing.
“New-home sales will remain depressed for some time as there are more bargains in the existing-homes market,” said Millan Mulraine, senior U.S. strategist at TD Securities Inc. in New York. “The glut of unsold houses and fickle demand will keep putting pressure on builders.”
The Commerce Department report is due at 10 a.m. in Washington. Economists’ forecasts ranged from 275,000 to 320,000.
Sales of previously owned homes climbed 7.7 percent in August to a five-month high 5.03 million annual rate, figures from the National Association of Realtors showed Sept. 21. The median price fell 5.1 percent from August 2010. Cash deals accounted for 29 percent of the transactions, while distressed properties, including foreclosures and short sales, made up 31 percent.
New-home sales, which are tabulated when contracts are signed, have lost their ability to forecast the broader market as demand shifts to previously owned houses. Purchases of existing houses are calculated when a deal closes about a month or two later. Resales accounted for about 90 percent of the housing market last year.
Miami-based Lennar, the third-largest U.S. homebuilder by revenue, reported a 31 percent drop in profit in the quarter ended Aug. 31 as sales fell. The market remains “challenging,” with “already skittish customers” driven away by burdensome mortgage-qualification rules, Chief Executive Officer Stuart Miller said on a conference call on Sept. 19.
Existing homes and foreclosures are Lennar’s “biggest competitors in today’s market,” Miller said. At the same time, there is “evidence that the consumer is beginning to return in earnest” as home prices have fallen to attractive levels and mortgage rates on 30-year loans are at record lows, he said.
Federal Reserve policy makers last week announced more steps to spur growth and revive the residential real estate industry, which since 1982 has aided every economic recovery except the current one that began in June 2009.
Housing starts dropped in August to the slowest annual rate in three months, the Commerce Department reported last week. The National Association of Home Builders/Wells Fargo sentiment index fell in September to a three-month low, other data showed.
Builders have fared worse than the broader stock market. The S&P Supercomposite Homebuilding Index, which includes and Lennar and Toll Brothers Inc. has fallen about 30 percent so far this year, compared with a 9.6 percent drop for the S&P 500 index.
“There are significant downside risks to the economic outlook, including strains in global financial markets,” the Fed said in a statement on Sept. 21 after its two-day meeting. “The housing sector remains depressed,” and there is “continuing weakness in overall labor market conditions.”
In a move aimed at lowering borrowing costs, the Fed said it will through June buy $400 billion of bonds with maturities of six to 30 years, while selling an equal amount of debt maturing in three years or less. The central bank will also reinvest maturing mortgage debt into mortgage-backed securities instead of Treasuries in an attempt to spur housing and refinancing.
--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Vince Golle
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